With consumers’ expectations over prices remaining high, it is expected that personal debt will also increase following the latest rise in interest rates in May.
“Last month’s interest rate rise did little to convince consumers that rates had reached a peak,” commented Trevor Williams, chief economist at Lloyds TSB Corporate Market.
“In line with the prevailing opinion of the financial markets, consumers believe rates will increase further this year,” he added.
The latest figures from the Bank of England show the country’s major banks had to write off £2.1 billion of bad debt in the first quarter of the year, 17 per cent more than the previous quarter, with credit card debt write-offs having risen 44 per cent.
The rise in interest rates is also expected to increase the price of mortgages and push more people to take unsecured debts including credit cards, overdrafts and personal loans.
The Consumer Barometer also reveals that a growing number of people are worried about their job security in the future.